Change is also afoot in Center Store, where the physical space dedicated to this anchor department continues to recede.

Half of retailers report that space once earmarked for shelf-stable food has been repurposed for merchandising fresh. “We’ve cut four feet off of three aisles to expand perishables,” shared one respondent.

In an attempt to revitalize Center Store sales, the majority (52.8%) is looking to the store’s well-trafficked perimeter and securing secondary placement for groceries in fresh departments. Others are mixing in new product innovations (63.9%), recipes/demos (47.2%), healthy reformulations (41.7%) and reorganizing aisles based on meal occasions (36.1%). “We’re resetting sections to incorporate as many new items as possible,” said a retailer of its refresh.

Industry players are hopeful their efforts will make an impact, with the average predicting a 2% increase in Center Store sales versus last year.

One constant is Walmart’s reign as the most formidable competitor for Center Store sales in  supermarkets, with 44.7% of retailers identifying it as the biggest threat — a more than 10 percentage point jump since last year.

A survey respondent attributed the change to Walmart’s more competitive approach. “Walmart has become more aggressive as their sales have faltered,” the retailer said.

In 2012, just over one-third of retailers (34%) reported the Bentonville behemoth was the alternate channel operator posing the biggest competitive threat, down from 64% in 2009.

Still, for many retailers the chain is untouchable. “Major manufacturers provide Walmart with an unfair cost advantage day in and day out,” said one.

SN Data Points: Groceries Positioned Slightly Off Center

Dollar stores (18.4%), natural retailers (7.9%), club formats (7.9%), limited-assortment discounters (7.9%), direct-to-consumer channels (5.3%), online retailers (2.6%), drug stores (2.6%) and other channels (2.6%) are also menacing.

“Every corner store, drug store and even home improvement store now carries Center Store merchandise,” said one respondent.

Another shared that sentiment, noting: “Walmart is the biggest threat now due to low price and ad match guarantees. Longer-term ‘all of the above’ is the right answer. It’s like getting nibbled to death by ducks.”

Traditional supermarkets can best compete by emphasizing price (35.9%); investing in private label (20.5%); specialty products (20.5%); value-added offerings, like in-store dietitians (15.4%); “other” strategies, such as an emphasis on customer service (5.1%); and by merchandising exclusive pack sizes or product bundles from national brands (2.6%).

Fewer food retailers compared to last year see private label as the best competitive tool (20.5% versus 34.6%), but 61.5% said private labels make up a larger portion of consumers’ baskets this year versus last, and 84.6% plan to update their store-brand offerings.

One-third will focus on new product innovations, and three in 10 on store-brand specialties. About one-quarter will develop natural and organic products, and 20%, ethnic foods. Brand consolidation (12.8%), entering a new private-label category (12.8%) and healthy reformulations (12.8%) are also on the corporate-brand agenda.

Purchasing private labels (38.5%) is among the top three cost-saving strategies employed by consumers, up from the No. 4 spot in 2012, according to retailers. The strategy trails stocking up on sale items (53.8%) and using coupons (46.2%), but is more popular than price freezes (12.8%) and buying in bulk (7.7%).

As 30 million uninsured Americans move closer to health coverage under the Affordable Care Act, three in four retailers endeavor to improve their health and wellness positioning.  Perhaps to attract these shoppers, 15.8% will enhance pharmacy services, 15.8% will partner with a hospital or university, 13.2% will offer access to a dietitian and 10.5% plan to invest in a nutrition and exercise program. In Center Store, four in 10 will add nutrition shelf tags/signs and more than one-third will grow their health-related product assortment.

With the Hispanic demographic a major growth target, about 75% of grocery stores plan to increase their ethnic marketing reach — mostly through increased product assortment (64.1%). Supermarkets will also participate in community events (25.6%); add bilingual in-store communications and employees (17.9%) and recipe demos and cooking classes featuring authentic ethnic meals (17.9%); launch ethnic private labels (12.8%); and open new locations under an ethnic format (2.6%). One respondent noted that “this is a huge sales opportunity for those who engage.”

Indeed, the shopper marketing efforts of just under a quarter of retailers and two-thirds of manufacturers will focus most heavily on  Hispanics.